Cowboy Constructions employs a full-time driver

Question # 00004220 Posted By: mac123 Updated on: 11/27/2013 11:21 PM Due on: 11/30/2013
Subject Accounting Topic Accounting Tutorials:
Dot Image
1.2 Cowboy Constructions employs a full-time driver and incurs costs for a vehicle to deliver paperwork between each of their building sites. Select Couriers has offered to carry out the work to the same standard of service for a fixed sum of £2,000 per month. Cowboy’s annual costs are currently:

Salary and oncosts of driver £16,000
Salary and oncosts of builder who
covers for sickness and annual leave
absences of driver £2,800
Depreciation of vehicle £2,500
Road tax, insurance & servicing £1,000
Fuel £3,000
Total £25,300

If Cowboy uses Select Couriers, it will sell the vehicle for £2,000, and the driver’s employment will be terminated without any redundancy payment. The builder who covers for sickness and leave of the driver is currently replaced by casual labour which costs £3,500.

What are the relevant costs involved in this decision?
Should Cowboy sub-contract its delivery requirements to Select?
What considerations are there in making this decision?
Dot Image
Tutorials for this Question
  1. Tutorial # 00004014 Posted By: mac123 Posted on: 11/27/2013 11:22 PM
    Puchased By: 2
    Tutorial Preview
    The solution of Cowboy Constructions employs a full-time driver...
    Cowboy_Constructions_employs_a_full-time_driver.xlsx (9.93 KB)

Great! We have found the solution of this question!

Whatsapp Lisa